Bangladesh Shilpa Bank (BSB) established under the Bangladesh Shilpa Bank Order 1972 (Presidential Order No. 129 of 1972) on 31 October 1972, to provide credit facilities and equity support to industrial enterprises in Bangladesh. It is the prime development financing institution (DFI) in the country for extending financial assistance for industrialisation. Initially, the authorised capital of the bank was Tk 1,000 million in 1972 and the paid up capital was then Tk 750 million, which was subscribed by the government of the People's Republic of Bangladesh. Later, the authorised and paid up capital was enhanced. In 2000, the authorised capital was Tk 2,000 million divided into 2 million shares of Tk 1,000 each. Tk 1,320 million (66%) was subscribed and paid up by the government while the rest were left for subscription by Bangladeshi nationals or by financial institutions at home and abroad.

The bank created a reserve fund of Tk 7 million in its first year of operations. In 1999-2000, the total reserve fund and other reserves of the bank stood at Tk 392.36 million. In 1982, the bank created a special equity fund titled 'Quasi Equity' by converting the 3rd, 5th, 6th and 8th UK credits received by it immediately after independence in 1971. The prime objective of the bank is to accelerate industrial growth in the country by financing industries, by providing advisory services in setting up new projects, and by assisting in balancing, modernisation, replacement and expansion (BMRE) of existing industrial units.

The Bank provides long and medium-term loans both in local and foreign currencies, guarantees repayment of loans raised by investors from other sources, and provides equity support by way of outright purchase of shares and by underwriting the public issue of shares. It also extends short-term bridge financing and working capital loans on a limited scale. BSB provides free technical advice in respect of plant and machinery, product and process, raw materials, market for products, and other related aspects to prospective entrepreneurs. It prepares project profiles for private entrepreneurs. All industrial projects either in the public sector or in the private sector are eligible for financial assistance from the bank. It follows a policy of diversifying its lending portfolio for widespread geographical dispersal of industrial enterprises, especially in less-developed areas of the country. With the view to bringing more dynamism and diversity in its activities, BSB started full-fledged commercial banking in 1993-94. This enables bank-financed projects to obtain commercial banking services including working capital loans, import of raw materials, etc.

On 31 December 2000, the total deposits of the bank were Tk 725.67 million comprising deposits received from banks (Tk 154.67 million), current account (Tk 72.24 million), bills payable (Tk 3.34 million), savings bank accounts (Tk 130.54 million), fixed deposits (Tk 267.01 million), and other deposits (Tk 97.87 million). Rates of interests offered by BSB on different deposit accounts varied between 7.75% and 9.75%, depending upon the duration of deposits. Lending rates of the bank varied between 10% and 18%. Up to end 1999, the bank financed a total of 1,573 industrial projects. The amount loaned to them was Tk 27,342 million. Total loans and advances of the bank (after provision for bad and doubtful debts) were Tk 7,136.26 million in 1999-2000. The distribution of the loans and advances by types were cash credit (Tk 1,121.96 million), long-term loans (Tk 19,242.87 million), overdraft (Tk 140.73 million), bridge loan (Tk 282.11 million), and staff loans (Tk 533.89 million). At the end of 2000, the cumulative amount of the bank's non-performing stuck-up loans stood at Tk 14,195.30 million, and were classified duly as substandard, doubtful, and bad, under the loans classification rules of bangladesh bank.

Shilpa Bank borrowed an amount of Tk 8,604.48 million during 1999-2000 from various internal and external sources. This includes F C Borrowing Accounts (Tk 360.32 million), BSCIC (Tk 3.94 million), Saudi Grant (Tk 11.80 million), KFW Counterpart Fund (Tk 165.93 million), Long-term loan from Bangladesh Bank (Tk 6405.57 million), KFW Loan (Tk 15.38 million), Danish Credit Counterpart Fund (Tk 7.49 million), and overdue installment interest and exchange risk A/C (Tk 1,634.04 million).

The foreign exchange business handled by Shilpa Bank in 1997-98 was Tk 479 million, but dropped to Tk 25 million in the next year. This business covers export servicing, import financing, and remittance facilities. In 2001, the bank had correspondent relationships with 35 foreign banks and other financial institutions. In June 2000, the BSB investments other than lending stood at Tk 1289.54 million and its investment portfolio comprised short and long term treasury bills and bonds, prize bonds, shares and debentures and equity investments in industrial units. Total assets of the bank were valued at Tk 24,002.90 million in June 2000.

The bank demonstrated a deteriorating trend in profitability since 1994. The cumulative loss of the bank stood at Tk 3,285.60 million in 2000. The main reason for losses is the huge amount of non-performing stuck-up loans for which the bank has to maintain large amount of provision from its profit each year. Borrowed funds constitute a major source of the bank's lending assets and posting of accrued interest in interest suspense account has lowered its net interest income.

The management of the bank is vested in a 9-member board of directors, including the chairman and the managing director appointed by the government. However, there is a provision that non-government shareholders of the bank shall elect 4 directors from amongst themselves. But till now, there is no private subscription in the bank's capital, and all directors are appointed by the government. The managing director is the chief executive officer. The bank has 16 branches. The total number of employees in the bank is 997. The head office of the bank is at dhaka and it has 3 zonal offices, one each at chittagong, rajshahi and khulna. It has six divisions and 23 departments. [S M Mahfuzur Rahman]